The FTSE 100 dropped 1% while the FTSE 250 was down 0.7% by 10:00 BST, as economic uncertainty weighed on investor sentiment.
Talks between Greece and the European authorities have failed to reach a conclusion, and parties remain in a deadlock over its debt crisis despite the end of June deadline approaching fast.
The lack of agreement makes a Greek default on its debt to the International Monetary Fund look increasingly likely, despite the optimism that surfaced at the start of this week.
The FTSE has now given up almost all of its gains since the start of the week, despite rallying some 1.7% on Monday on optimism that Greece would secure further bailout funding.
Sharp market falls seen in China overnight also put pressure on stocks, with miners BHP, Glencore and Anglo-American each falling around 2%.
Tesco was the biggest riser in the index, with its shares up 3.5% to 226p. The firm reported its first quarter results this morning and described them as a “step in the right direction”.
The statement revealed sales declined 1.3% in the 13 weeks to 30 May – an improvement on the 1.7% dip between December and February, and a sign the turnaround strategy is beginning to work.
The food retailer’s positive results gave a boost to wider supermarket sector, with J Sainbury and Morrison also among the top risers, up 1.6% and 1.2%, respectively.